Amarin - Vascepa Gains Protection Until At Least 2020

| About: Amarin Corporation (AMRN)

Summary

The FDA granted Vascepa a five year NCE marketing exclusivity period, after a federal district court overturned its previous decision for a three year period.

This prevents generic Vascepa from entering the market until 2020 at the earliest, with patent battles potentially delaying it further.

This removes the risk that REDUCE-IT is completed after generics have started to take market share.

Vascepa prescriptions continue to grow, although the long-term compound growth rate of approximately 1% per week is less than the 2% to 3% needed to avoid requiring additional funding.

Additional funding may potentially come via an equity offering or additional licensing.

Amarin (NASDAQ:AMRN) recently received some good news when the FDA granted Vascepa a five year marketing exclusivity period. Combined with the 30 month postponement of any generic Vascepa approval beyond that point, this results in the delay of generic Vascepa to January 2020 at the earliest. This ends the risk that Amarin gains label expansion through REDUCE-IT after generics are already on the market and taking its market share.

While Amarin's long-term upside is preserved by this news, it still has some shorter term challenges. Vascepa continues to show prescription growth, but the prescription growth isn't strong enough to prevent Amarin from running low on cash without additional licensing revenue or equity funding.

FDA NCE Marketing Exclusivity Period

The FDA recently gave Amarin some good news when it determined that Vascepa was eligible for a five year new chemical entity [NCE] marketing exclusivity period. This is in-line with the federal district court ruling from May 2015 which indicated that the FDA was incorrect in originally granting Vascepa only three years of marketing exclusivity.

Although this only covers five years from the date of Vascepa's FDA approval (until July 26, 2017), Amarin can ask for and automatically receive another 30 months stay of any generic Vascepa approval by the FDA. Therefore, generic Vascepa will not be able to hit the market until late January 2020 at the earliest. Generic Vascepa could take even longer to hit the market as generic Lovaza ended up on the market around 10 years after Lovaza's FDA approval, while Amarin believes that its patents will protect Vascepa until 2030.

This helps Vascepa's long-term potential significantly as it will now have some guaranteed period of exclusive access to an expanded market assuming that REDUCE-IT is successful. Watson Laboratories was planning on introducing generic Vascepa to the market, which could have occurred before REDUCE-IT was completed if Vascepa wasn't granted the five year NCE marketing exclusivity period and if Amarin lost the patent battle.

Continued Prescription Growth

Vascepa's NRx increased 8% from the week ending April 22 to the week ending May 29. This is solid growth over the five week period, but overall growth rates are still likely not enough for Amarin to avoid needing to raise additional funds through an equity offering or licensing Vascepa in other regions (similar to China).

Vascepa's growth rates vary a fair bit over short timeframes, but it has yet to show high enough consistent growth for Amarin to avoid a liquidity crunch without additional funding. A compound growth rate of 2.4% per week would likely reduce Vascepa's cash burn to around $60 million during 2016, raising its year-end cash balance forecast to $47 million. That may still be too low a cash balance for Amarin to be comfortable with, although continued compound Vascepa prescription growth of 2.4% per week would likely make Amarin cash flow positive in Q1 2017 including REDUCE-IT costs, interest costs and BioPharma repayments. The compound growth rate for Vascepa prescriptions that is required for Amarin to avoid needing additional funding is estimated at 2% to 3% per week. Vascepa's compound growth rate has typically averaged close to 1% per week over an extended period of time though, and I don't believe that it has maintained a compound growth rate of 2% to 3% per week (excluding weeks affected by holidays) for more than a short period of a few weeks over the past year.

Conclusion

Amarin now has a guaranteed window of opportunity between when REDUCE-IT is completed and when generic Vascepa can enter the market. It does however likely need to bridge a funding gap since Vascepa's growth isn't high enough for Amarin to avoid needing additional licensing proceeds or an equity offering to shore up its liquidity. Amarin will also likely need more funding to ramp up marketing and sales efforts to an expanded target market if REDUCE-IT is successful, although in that case Amarin would be seeking funding from a position of strength.

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